Employer's Duty to Monitor Fees of Retirement Plans



By: Joyce M. Mocek

Last week the U.S. Supreme Court, in Tribble v. Edison International, No. 13-550 (S.C. May 18, 2015) held that employers have a continuing duty to keep watch and monitor Employment Retirement Income Securities Act (ERISA) 401K plans to guard against high management fees in the plans.  The Court in its decision essentially shifted the burden in disputes over monitoring fees and costs in retirement plans to the employer.

In Tribble, current and former employees of Edison International argued that the ERISA plan fiduciaries selected mutual funds with management fees that were too high and that this negatively affected their retirement funds.   The lower court dismissed the case, holding that the lawsuit had not been timely filed.  The Supreme Court reversed the lower court, holding that employers and fiduciaries had a continuing duty to monitor investment options and that this duty included removing “imprudent investments.”   This decision, in addition to imposing additional duties on employers, may also have an effect on the financial industry as a whole to lower fees.   Employers should be mindful of this trend of the continuing, albeit heightened, duties placed on companies in the ERISA context.